Business Rates
CBRE conclude long-running dispute regarding the value addition for fit-out / differentiation between Cat A and Cat B offices in Central London
The decision in Bunyan (VO) v Acenden LTD has been concluded, with CBRE settling the lead case in London. The case listed for valuation tribunal in March 2023 has been settled by negotiation.
The decision quite clearly sets out the opinion of the Upper Tribunal: “We have firmly rejected the proposition that a building in Category B condition is worth no more [in terms of rateable value] than a building in Category A condition.” The quality of the evidence provided by the parties comes in for criticism, although it is unclear if better evidence would have persuaded the Tribunal to arrive at a different outcome.
The main outcomes of the settlement are as follows:
The issue of the quality of evidence is likely to be a recurring theme with most office lettings in Central London agreed on a Cat A basis. Fitted out or Cat B evidence will include sub-letting, assignment, short-term or distressed sales making reconciliation with the rating hypothesis difficult.
The 2015 fit-out within Ascot House (occupied by Acenden Ltd) is described as ‘generic and unexceptional’, and the decision makes an addition of rateable value £46 per sq metre. This sets a marker as to the expectation of the level of increase attributable to an unremarkable fit out in Maidenhead.
This case was decided on the facts presented but one can draw any inference as to the anticipated level of addition for offices in Central London, where fit-out varies enormously in terms of style, intensity, layout, and expense.
The solution that presents itself is to make an addition that acknowledges the underlying principle, but also recognises the complexities of the market and the vast array of unique fit-outs, each with a relatively short life-span – a compromise figure. That compromise figure is £25 per sq metre.
This addition will be made to Cat A rental evidence that is considered within the Check Challenge and Appeal environment and will be used to help determine the level of rateable value. Existing rateable values will not be increased in either the 2017 or 2023 rating lists.
CBRE have led these discussions from the outset and are pleased to have been able to broker this agreement that negates the need for further litigation, which would have held up the progression of 2017 list appeals for many months.
Private practice and the Valuation Office have agreed to proceed on this basis, and we therefore expect our appeals, some of which have been outstanding for many years, to progress to resolution over the coming months.
It should be stressed that these discussions are limited to Central London offices. Offices and other asset classes in other locations are excluded. We continue to gather evidence from around the country which will determine how this issue is dealt with on a regional basis, and there is no assumption that the treatment of London offices has any bearing beyond.
Bunyan (VO) v Acenden Ltd [2023] UKUT 17 (LC); the full decision can be found here.
The decision quite clearly sets out the opinion of the Upper Tribunal: “We have firmly rejected the proposition that a building in Category B condition is worth no more [in terms of rateable value] than a building in Category A condition.” The quality of the evidence provided by the parties comes in for criticism, although it is unclear if better evidence would have persuaded the Tribunal to arrive at a different outcome.
The main outcomes of the settlement are as follows:
- Decision in Bunyan (VO) V Acenden Ltd states Cat B space is worth more than Cat A.
- Cat B addition of £46/sqm applied to Ascenden Ltd’s offices at Ascot House, Maidenhead.
- Following Bunyan (VO) v Acenden CBRE have settled their lead case in the City of London. The case listed for Valuation Tribunal in March 2023 has been settled by negotiation.
- CBRE and VO agree Cat B addition of £25/sqm to be applied to Central London grade A offices.
The issue of the quality of evidence is likely to be a recurring theme with most office lettings in Central London agreed on a Cat A basis. Fitted out or Cat B evidence will include sub-letting, assignment, short-term or distressed sales making reconciliation with the rating hypothesis difficult.
The 2015 fit-out within Ascot House (occupied by Acenden Ltd) is described as ‘generic and unexceptional’, and the decision makes an addition of rateable value £46 per sq metre. This sets a marker as to the expectation of the level of increase attributable to an unremarkable fit out in Maidenhead.
This case was decided on the facts presented but one can draw any inference as to the anticipated level of addition for offices in Central London, where fit-out varies enormously in terms of style, intensity, layout, and expense.
The solution that presents itself is to make an addition that acknowledges the underlying principle, but also recognises the complexities of the market and the vast array of unique fit-outs, each with a relatively short life-span – a compromise figure. That compromise figure is £25 per sq metre.
This addition will be made to Cat A rental evidence that is considered within the Check Challenge and Appeal environment and will be used to help determine the level of rateable value. Existing rateable values will not be increased in either the 2017 or 2023 rating lists.
CBRE have led these discussions from the outset and are pleased to have been able to broker this agreement that negates the need for further litigation, which would have held up the progression of 2017 list appeals for many months.
Private practice and the Valuation Office have agreed to proceed on this basis, and we therefore expect our appeals, some of which have been outstanding for many years, to progress to resolution over the coming months.
It should be stressed that these discussions are limited to Central London offices. Offices and other asset classes in other locations are excluded. We continue to gather evidence from around the country which will determine how this issue is dealt with on a regional basis, and there is no assumption that the treatment of London offices has any bearing beyond.
Bunyan (VO) v Acenden Ltd [2023] UKUT 17 (LC); the full decision can be found here.
Related Service
Collaborating with you to understand your business drivers helping you understand and reduce your business rates liabilities.
